The Reserve Bank of Australia has been in the news recently, thanks to a corruption scandal splashed across the front pages of newspapers throughout the country. According to reports, two currency firms overseen by the Reserve Bank funnelled bribes to government officials in Indonesia, Malaysia and Vietnam, to win banknote deals. Securency and Note Printing Australia are partly and wholly owned (respectively) by the RBA, and many prominent political figures sat on the boards of the two companies.

Leithner is an adherent of the Austrian School of Economics, which argues that central banks are behind the boom-bust cycle that characterises modern economies. They are, in other words, the culprit responsible for recessions and depressions. By controlling the overnight cash rate (the rate at which banks borrow from the central bank), the Reserve Bank is able to control the money supply and thereby influence interest rates. This sets in motion a process that influences the rate of interest on housing loans, deposits and business loans.

When interest rates are kept artificially low, distortions in the structure of production, excessive borrowing and speculation are the result. The central bank’s loose money policies mislead investors into starting projects that appear profitable, but in hindsight are not. The crash comes because investors foolishly think that the boom will last, and leverage themselves too highly, as they were not prudent in their accumulation of debt.

This, in a nutshell, is the Austrian theory of the business cycle. According to this view, economic downturns are the price paid for prior (artificial) credit expansion.

We find evidence of this in the United States, when the Chairman of the Federal Reserve – Alan Greenspan – kept the federal funds rate at an absurdly low 1% from June 2003 till June 2004. Many attribute the resulting housing bubble to Greenspan’s suppression of rates.

In Australia, Leithner shows that the RBA also started an artificial boom. Leithner shows that from 1991-2007, the money supply rose rapidly. By Leithner’s reckoning, inflation (the M1 measure) increased by 404%, at an annualised compound rate of 10.2%. As in the US, much of the credit created by the Reserve Bank was pumped into the housing market, creating an asset price bubble. Stock prices were inflated.

For Leithner, however, the bust has not yet arrived – hence the reason why the Australian recession was not as severe as its American counterpart. Australian house prices remain overvalued and have not dropped to more realistic levels.

The role played by central banks in fostering monetary instability leads Leithner to question whether we need a central bank at all. It’s not a crazy question! For much of Australia’s history, there was no central bank. Private banks issued currencies and there was little government regulation of the banking sector.

In an environment of global financial instability that many argue is caused by central banking, it is worth asking serious questions about these institutions. Most central banks are highly secretive about their activities. For instance, the Reserve Bank did not even publish minutes of board meetings until December 2007.

There is a fundamental democratic principle involved here. Why should central banks, which are staffed by unelected bureaucrats, wield such a high level of discretionary power? Shouldn’t there be more democratic oversight of these money mandarins who have so much influence over our living standards?

We have seen what happens when central banks are left unchecked. In Zimbabwe, for example, hyperinflation has crippled the purchasing power of the currency. Prices in the African country rise at an extremely rapid pace, over 50% per month. Nobody is suggesting that a catastrophe of that nature is likely to befall Australia. But Zimbabwe is a reminder of the awesome power that central bankers wield, and should prompt us to improve accountability and search for less discretionary ways to manage money and banking.​Originally published in Indian Link(September 2011).

Shortly after the US House of Representatives passed its latest iteration of health care reform, President Donald Trump said that Australia has "better health care than we do."

White House spokesperson Sarah Sanders clarified that Trump did not intend to suggest that he favors shifting to an Australian-style system, but was merely complimenting an ally. As Sanders explained, "[w]hat works in Australia may not work in the United States."

The problem is that the Republican health care bill passed by the House, which the president enthusiastically supported, would be a step toward a central-payer health system.

The System Down Under

As Senator Rand Paul pointed out in a recent oped, the new bill would divert subsidies toward already wealthy insurance companies. “Federal subsidies given to insurance companies is crony capitalism at its worst and will inevitably lead to bigger and bigger taxpayer bailouts until government creeps into every nook and cranny of health care,” he wrote.

In these respects, the bill is actually a step toward the Australian ‘universal’ health system, which is a mixture of public and private hospitals, with public hospitals providing “free” or subsidised primary and specialist care, and the private system operating alongside for those able to afford insurance. The Australian government also subsidizes insurance companies to the tune of billions through an individual rebate for health insurance.

Even with a government-controlled system paid for through hefty taxes, however, about 50 percent of Australians feel the need to shell out extra for private hospital insurance, suggesting that the public system has downsides.

In Australia’s government-managed system, for example, you can’t choose your doctor – you have to take the first one allocated to you, even though you may prefer someone else. You can’t choose the time and place of treatment, and there is little flexibility since appointments are generally based on the hospital’s schedule with little regard to your own.

Because governments necessarily have limited resources, not every health need can be funded. For example, some pregnant women are discharged too early after giving birth because the hospital needs to put someone else on their bed.

Consider, also, the plight of those seeking elective surgery. These patients can suffer on waiting lists for months (with two percent of patients waiting for over a year) before they are able to get much-needed medical treatment. The median wait time in 2015 was 37 days, even though many ‘elective’ procedures are pretty important – like gallstone removal, heart bypass surgery, neurosurgery and knee, hip, and shoulder replacements.

Expensive and Insufficient

My own experience is illustrative. In 2013, I was losing weight and discharging blood. Since my illness was categorised by a bureaucrat as not life threatening, I was unable to get an immediate appointment with a public hospital.

I was placed in Category 2, meaning that I would have to wait up to 90 days. If I had carried private health insurance at the time, I would have been scheduled for a colonoscopy within days and could have been diagnosed with ulcerative colitis sooner. Conditions like this one can be serious if they go untreated for several weeks, and situations like mine are common.

Government health care will do just barely enough to keep you alive – it won't help improve general quality of life. If you don’t ration resources through the market system, it ends up being rationed through arbitrary rules set by lawmakers.

Socialized health care in Australia has driven costs up, too. Each year on April 1, the insurance companies increase premiums above the rate of inflation. Some policies can increase by hundreds of dollars without any increase in the level of benefits paid out.

Meanwhile, cost of living pressures for consumers continue to mount – most notably due to a tax increase in the Medicare Levy Surcharge. Barring massive increases in immigration to counteract the effects of an aging population entering retirement and dropping out of the tax revenue pool, there are likely to be further tax increases.

Not that being able to afford private health insurance is a panacea. Health care costs are so high in Australia, that even having relatively comprehensive insurance does not guarantee there won’t be significant out-of-pocket expenses after a stay in the hospital. This is because of the gap between what insurance companies pay, and what some doctors charge.

Wouldn’t it be better if there were lower taxes accompanied by a removal of subsidized health care? It only makes sense for there to be transition measures to aid the poor as we shift away from reliance on government. In the long run, the benefits of holistic care, quicker surgery times, and more patient choice will outweigh the short-term challenges.

This is Not What the US Needs

Australia is not a good model for American health care. While public hospitals do provide almost-entirely-free treatment, this needs to be weighed against the quality of life disadvantages that come with socialized treatment.

Price inflation and a public debt of $400 billion have been the result of socialized medicine in America’s ally down under. What makes Republicans think the outcome will be any different in the US?

Fred Argy (Letters, 12/12) misses the point. The point of privatisation is not to generate revenue for government. Indeed, if I had my way there would be no selling involved - shares would be gifted to all Australians equally. The real objective of privatisation is to expose a service to the discipline of the market.

The true "furphy" of the proposed electricity sale in NSW is that it would not be full privatisation, because there are many regulatory impediments (such as price controls) that would prevent the free operation of the market. This would likely lead to suboptimal outcomes as suppliers would need to seek approval from bureaucrats to make operational decisions. Of course, then we could expect to hear criticism of privatisation!

Well-written fiction books are a pleasure to read. The good ones are full of plot twists, suspense, passion and can be life changing – or at least thought-provoking. They can make you laugh, cry and perhaps even become angry. Really good ones can capture the imagination of an entire generation, or are adapted to hit the movie screens. To use a recent and well known example, consider how much different the world would be without Harry Potter!​The Frankenstein Candidateis intellectually heavier than your average J.K. Rowling. In designing the plot, Kolhatkar seems to have set out with a clear purpose: to present a specific set of ideas about government and society. It’s a book that features jargon such as ‘Keynesianism’, ‘economies of scale’ and ‘inflation’.

The world Kolhatkar constructs is based around a US election where two of the leading candidates are Senator Olivia Allen and the wildcard billionaire Frank Stein. We are taken on a journey where Olivia and Frank, running on different policy platforms, find that they are more similar than they first thought. Stein is spending his fortune on a quixotic and straight-talking campaign for president, and in many ways reminds me of US Congressman Ron Paul’s most recent bid for the presidency.

Along the way, various shenanigans inspire interest in the characters’ personal stories. It’s here that Kolhatkar is at his best. For example, when he delves into the psyche of Olivia in a scene where she is consulting her psychologist about her ‘imposter syndrome’ (a condition that makes it difficult for her to believe in her own self-worth) the reader feels genuine empathy for her high pressure lifestyle and most people would be able to relate to some degree.

Kolhatkar is a believer in free-markets and libertarianism and the dialogue is written with this strong philosophical undercurrent subtly, and sometimes not so subtly, in mind. Lead characters are in the mould of Ayn Rand’s Atlas Shrugged – intelligent, principled and determined. Stein, for instance, is the type of person who’d say ‘I’d rather be right than be President’.

Where the book might fall short, at least according to mainstream populist standards, is in its focus on technical economic subject matter. Certain passages read like a business article rather than a fiction novel, but this is probably unavoidable given the context in which the story is being told.

Nonetheless, there can be little doubt that this is a novel that will leave readers intrigued. It certainly delivers what it promises: a fast-paced plot packed full of twists and turns that should cement Kolhatkar’s place as an original writer.

In 1945, the United Nations was founded amidst much euphoria. It was to be mankind's "last best hope": an organization that would tie all member-states together for collective security and peacekeeping purposes. But the U.N., useful as it has been in some minor cases where a broker was required, has been totally ineffectual at removing the harmful ideologies that cause war in the first place. It has done very little to quell aggressive economic and political nationalism, for example. But most disappointingly, the U.N. has been a destabilizing force. It has allowed itself to be used by the great powers, and especially America, to cloak militarism.

From 1945 to 1990, the U.N. was forced to limit itself to small-scale operations (with the exception of the Korean War) due to the prevailing Cold War rivalry between the United States and the Soviet Union. As the Cold War drew to a close however, another round of excitement swept through the globalist camp. "At last!" U.N. supporters declared, the organization could function as envisioned by its founders. Instead of tensions between the U.S.and the U.S.S.R. crippling the Security Council and placing some matters beyond its jurisdiction, there would be a new age of cooperation. This was to lead to a more effective institution.

But what did it mean to be more "effective" when the underlying ideologies of interventionism and nationalism still dominated foreign policy discourse? This question remained unanswered. Instead, the U.N. adopted a fallacious public sector definition of effectiveness. It prided itself in "doing something, anything" with its available resources (Rothbard 1974, p. 82). The more things it did, no matter how absurd, the more effective the U.N. bureaucrats claimed they were. Thus, the U.N. boasted of an increase in the size and scope of its operations. A new Department of Peacekeeping Operations was created. At its height in 1994, the U.N. had nearly 79,000 peacekeeping personnel; the organization had substituted small-scale operations with a permanent nation-building corps.

Since effectiveness was measured in terms of the scale of U.N. activities, rather than the usefulness of said activities, there was no discernable difference in the extent of world peace. Realpolitik struggles continued as they had been for thousands of years. There was no overarching strategy presented to achieve the Charter's objective of saving "succeeding generations from the scourge of war". The U.N. is, therefore, a typical example of an organization full of men and women brimming with enthusiasm, but who have no understanding of the bigger picture.

In the absence of a coherent strategy to bring about world peace, the U.N. was easily captured by the U.S.to suit its own ends at the end of the Cold War. With a submissive Russia now taking the place of the belligerent Soviet Union, America possessed a unique opportunity to ram through its agenda. As the most powerful nation on Earth, America could now focus upon using the U.N. as an instrument for its warmongering (Eland 2008).

So it was no surprise that President George Bush I immediately set about using the U.N. to provide multilateral credibility for his desires to protect Israel and oil interests in the Middle East. By assembling a coalition under the United Nations banner to take on Saddam Hussein, ostensibly over his invasion of Kuwait, Bush I was able to justify military action that had nothing to do with American national security. Thanks in part to the rubber stamp provided by the Security Council, the first Gulf War also helped push up Bush I's approval ratings.

President Clinton also took advantage of the changed balance of power on the Security Council. He placed heavy political pressure on the U.N.'s disarmament wing - the International Atomic Energy Agency - to investigate Iraq. Some allege the administration was hoping for an excuse to attack Iraq, or at least a way to trump up the threat of weapons of mass destruction. Support for this charge can be found in President Clinton's decision to sign into law the Iraq Liberation Act of 1998, which instituted a policy of "regime change". Clinton continued aggressing against Iraq by bombing it in a four-day campaign that was timed to be suspiciously close to impeachment proceedings against him (needless to say, the bombings served as a useful distraction). America also led a round of punitive U.N. sanctions that caused the deaths of hundreds of thousands of Iraqis. But there was hardly a wimper of opposition from the public; these outrageous acts of war had, after all, been done by appealing to the legitimacy of America's lapdog - the United Nations.

Years of hassling Iraq through the U.N. in order to boost popularity for the commander-in-chief culminated in George Bush II using September 11, 2001 as a pretext for outright regime change (in effect, taking the Iraq Liberation Act passed during Clinton's time a step further). Years before September 11, there was concern in the international community that America would use pre-existing U.N. resolutions as an excuse to implement its own agenda against Iraq (Mingst & Karns 2000, p. 105). How prophetic these concerns turned out to be!

When the time for prosecuting war came in 2003, President Bush II frequently cited Security Council resolutions passed during Bush I and Clinton's presidencies to justify his aggression. The quality of debate in America was degraded, as commentators began speaking of these resolutions as having independent authority - as if the U.N. were a neutral body and did not merely do whatever its most powerful members wanted it to do. All sense of perspective on the moral arguments for and against war was lost, as various sides tried to justify or oppose the invasion using legal terminology. Instead of asking whether it was right or wrong to attack Iraq, people began asking whether it was legal or illegal under international law. But surely the former is more important than the latter when so many lives are at stake?

The Iraq war is the culmination of at least 10 years of warmongering by America through the United Nations. The same pattern is now being repeated against Iran, with President Trump taking a hard-line, just as Bush II did before him. We can expect, no doubt, that any future attack on Iran will also be justified with reference to U.N. resolutions. Hopefully, libertarians would have by then persuaded Americans of the need to withdraw from the U.N. It is imperative that power elites be stripped of their ability to utilize this tool that legitimizes war.

Conclusion

As public choice theory predicts, "bureaucracy capture" has occurred at the United Nations. This is not surprising, given its highly politicized nature. We should expect that the powerful will use the organization as an instrument for their own schemes. In this sense, the U.N. is not an organization dedicated to achieving peace. Rather, it is dedicated to achieving whatever the dominant nation or nations at the relevant time deems worth achieving.

There is continuing debate among scientists over the extent and causes of global warming. Some say warming will be minimal; others argue that the world is facing a significant challenge which could harm future generations. Almost nobody suggests that the planet is cooling.

Yet science is only half of the debate. The other half is concerned with the appropriate policy response. This involves economists, not scientists. Unlike its scientific counterpart, the debate on what exactly should be done in response to global warming is not even close to completion. Here too, there is diversity of opinion. Some say Australia should implement a carbon tax. Others prefer a carbon trading system. Most agree the best solution would be one which reduces carbon dioxide emissions, and also does not harm economic growth.

The Rudd government acted quickly without waiting for the economics debate to run its course. A new department dedicated to tackling climate change has been established. Its mandate is to implement and recommend policies that would reduce Australia’s greenhouse gas emissions.

But there’s a problem. While bureaucrats in the Department of Climate Change are busy coming up with ways to ward off the global warming bogeyman, their colleagues in the Department of Industry are diligently subsidising the very fossil fuel companies that contribute to global warming. A study released by the Australian Conservation Foundation in 2006 found that a large amount of corporate welfare is given to causes that hurt the environment. As The Age reported on October 29 of that year, “Analysis of this year’s federal budget papers reveal that programs for activities that increase greenhouse gas emissions will attract total funding of about $8 billion in the 2006-07 financial year.”

Does it seem odd that two agencies are actively working against each other? It appears to be accepted practice within the government, judging by the lack of protest.

About $570 million was distributed as industry assistance to car manufacturers. Of course, eliminating this subsidy could result in the loss of jobs. However, as the car industry receives recurring grants on an annual basis, it would be cheaper to give every sacked worker a taxpayer-funded severance payment, rather than persist with a policy that not only harms the environment but also distorts the market.

Some environmental groups prefer increased government spending on other more ‘appropriate’ programs, regardless of whether these subsidies are eliminated. This can only exacerbate the problem. As politicians must always be seen to be ‘doing something’ about the environment, there is a risk that ill-conceived ideas adversely impacting standards of living will be implemented.

This would not be so bad if measures addressing climate change occurred at a state rather than Commonwealth level. Some states with heavy industry like Western Australia, could adopt a different response to states with less industrial development. Unfortunately, this ideal is practically impossible given the growth in federal government power over the past century, so we are stuck with a one-size- fits-all environmental management that does not adequately take into account regional variations. Anything the states do tends to supplement, rather than replace, federal environmental regulation.

We must not hand further discretion to the government to spend on programs considered beneficial, as this additional spending could result in similar unintended consequences. We should only demand that all subsidies to fossil fuels cease. The effect of eliminating these subsidies could then be noted, and this evidence could further contribute to environmentally-friendly policies.

A cautious approach towards climate change is appropriate given that the costs of government intervention, when mistakes are made, can be exceptionally high. And the benefits can be disappointingly low.​Which politician will have the courage to stand up to vested interests that benefit from lavish subsidies? Once time permits, a thorough analysis of the Rudd government’s budget for 2008-09 (released on May 13) will reveal if there is any improvement upon the Howard government’s record. However, I am not optimistic!

1. Friedman’s money growth rule, which would be a legislated rule instructing the monetary authority to achieve a specified rate of growth in the stock of money. For this purpose, Friedman defines the stock of money as including currency outside commercial banks plus all deposits of commercial banks. He "would specify that the Reserve System should see to it that the total stock of money so defined rises month by month, and indeed, so far as possible, day by day, at an annual rate of X per cent, where X is some number between 3 and 5" (Dollars and Deficits, p. 193).

2. A gold standard is another reform aimed at reducing arbitrariness in monetary policy. Former Chairman of the Federal Reserve, Alan Greenspan, once defended gold because of its ability to act as a restraint on government. "The idea behind a gold standard," Reed observes, "is to remove from the hands of politicians or their political appointees the discretion of determining a nation's supply of money". Under a gold standard, individuals have a legal right to redeem the notes they hold for gold from the central bank’s vaults. As a result, the central bank must have reference to the amount of physical gold before changing the money supply. By contrast, under the current prevailing fiat paper standard, monetary authorities have complete discretion: they can inflate or contract the money supply at will.

3. Another means of eliminating discretionary power in monetary policy is to legalise free banking, a system where private banks are permitted to issue their own notes. Since free banking does away with the need for a central bank (there is no ‘lender of last resort’), monetary policy is denationalised and decentralised away from state control, removing the ability of a few individuals sitting on a monetary policy board to control a nation’s money. Under a regime of free banking, commercial banks are lightly regulated and are treated the same as any other business, subject only to the general company law.

Andrew Norton's support for the budget's changes to higher education repayment thresholds (Age Online, 10/5) makes no sense for those who have received little or no benefit from their studies.

Nobody is entitled to free money from taxpayers. However, it undermines fairness to penalise, for example, unemployed law graduates who cannot get a job because the government – in association with legal professional bodies – do their best to minimise competition in the industry. (For example, by setting up barriers to registration as a lawyer, requiring extensive formal study when there are flexible and cheaper internship-based options to convey knowledge.) At the same time, MPs and bureaucrats enjoy luxurious perks and pensions.

Why not go after the most marginalised in society last, after the elites have had their generous salaries cut?

In spite of the mass murder perpetrated by the governments of the Soviet Union, China, Cuba, and many other “revolutionary” societies, socialism continues to have many real world adherents. So deep is the faith that even India’s former finance minister Palaniappan Chidambaram, in an interview with TIME magazine in 2005, professed that “Socialist goals remain valid. What we are trying to do is devise and invent better means to achieve those goals”.

For socialists, the standard retort is that none of the societies that we traditionally consider as socialist were socialist. Rather, they were “state-capitalism”.

Even if that were true, the dictionary definition of socialism doesn’t inspire much confidence either.

Would you be in favour of an economic system in which it’s assumed that the government owns everything, including your body? Because that’s what socialism is – “government ownership and control of the means of production”. The “means of production” are land, labour and capital. Under socialism, individuals (labour) are mere cogs in the government’s machine; their sole function is to obey dictates from the central authorities.

Socialism is merely a variant of what used to be called feudalism. Before the advent of democracy, kings would demand complete obedience from their subjects, usually by appealing to superstition and religion. In this way, the elites cemented their power and exploited the population.

Of course, eventually the people decided to revolt: the French and the American revolutions ushered in the idea that all human beings have a right to their life, liberty and property without interference from the government. After these revolutions, the intellectual climate changed, and the lies of the monarchy no longer worked to the same extent. Thus, the rulers were forced to give up some of their power – and the end result was democracy, in which citizens freely elect their representatives.

But unfortunately, the constant struggle between those who wish to wield power and those who are victimized by it (ordinary folk like you and me) hasn’t ended. Democracy may allow us to choose our leaders, but it doesn’t guarantee that they won’t abuse private property rights while they’re in office. The lies of the elites are still being propagated, although it’s a lot more subtle.

One of the biggest lies is that we “need” government to commit theft against productive citizens in order to provide services such as healthcare, education and defense. Convincing the public to believe this has been a primary objective throughout history. Government, according to the parasites that live off taxpayer money, simply must exist.​Nothing could be further from the truth. When it comes to education and health, there is ample evidence that the private sector could provide these services cheaper and at higher quality. But what about defence? Do we need a government to provide security? Two brilliant theorists – Murray Rothbard and Hans Hermann Hoppe – have argued that we do not, and I tend to agree with them.

Whether Rothbard and Hoppe are right or wrong is a debate for another day. My point is simply this: socialism is an historical regression towards feudalism, under which we are all slaves of the government. The soft-socialists of today – social democrats – would do well to take note.

An essay in Policy by Edwin van de Haar (Autumn 2009) does a great job of explaining how libertarian principles apply to international relations. According to Haar, libertarians are opposed to international organisations, treaties and foreign aid. They also advocate free trade as a means of increasing cooperation between nations and reducing the likelihood of conflict.

And although Haar does not say this explicitly, libertarians are also hesitant about intervening militarily.

In Australia debate on issues of foreign policy is dominated by conservatives and social democrats, both of whom favour intervention overseas. The only difference between the two mainstream ideologies pertains to the particular instances on which they would intervene. Social democrats tend to be sympathetic towards so-called ‘humanitarian interventions’, while conservatives favour ‘police actions’ such as in Iraq.

But the libertarian rejects entirely the mainstream consensus surrounding intervention. Rather than assuming that states have a right to intervene and then quibbling on where and when, the libertarian draws upon the great tradition of non-interventionism, or neutrality, in foreign affairs.

Non-intervention was the hallmark of American foreign policy for nearly a hundred years, and has the advantage of avoiding all wars not essential to the territorial defense of a country.

The logic behind non-interventionism derives from a fundamental axiom of liberal thought that no person may aggress against another unless in self-defence.[2] It becomes apparent then that all State wars are unjust, for they are financed through coercively acquired taxes, which are itself an act of aggression - and therefore forbidden.

But we need not go this far to a pure libertarian position to understand why non-intervention is beneficial. For libertarians the key rationale behind opposition to war is encapsulated in Randolph Bourne’s famous dictum that “War is the health of the State". It is during times of war that the government grows most swiftly. Thus it was liberals such as Richard Cobden, not those of the ‘left-wing’, who were among the first to rail against imperialism and colonialism.

There is a contradiction between claiming to support laissez faire on the one hand, and approving of foreign policy adventurism on the other. Self-described classical liberals who support war are actually going against the very philosophy they claim to espouse. Even if the cause is just, and even if one emerges victorious, the end result of war is usually a permanent increase in the size and scope of government.[3]